Index Movements: Focus On The FTSE 100
The mining sector has endured tremendous weakness of late with slumping commodity prices for precious metals, coal, iron ore and copper weighing heavily on profitability. That the sharp declines were led by Chinese weakness are not to be underestimated. Binary options traders had a field day shorting the aforementioned commodities, but it appears that the tide may be turning for a group of FTSE 100 mining companies. Recall that Glencore PLC (GLNCY) led the way as the worst performing company on the FTSE 100 index? That trend has been reversed and we’re seeing some solid steps being taken to help shore up this massive mining company’s share price, earnings and long-term profitability.
1-Year Performance of the FTSE 100 Index
The reason I’m focusing on Glencore PLC is pretty simple – this company led strong declines in the FTSE 100 index from July through October. The reversal we’re seeing is largely a result of renewed confidence in mining stocks which I maintain are still highly undervalued.
Quick Facts to Help You Make Trading Decisions:
Glencore Price Reversal 4 November 2015
- Glencore PLC (GLEN: FTSE 100) is trading 8.33% higher at 129.45000p per share. On the 28 September it plunged to 68.62p per share.
– Glencore PLC is cutting debt by $10 billion to $20 billion within a year
– Glencore PLC is on track to save $2.4 billion by not paying Q4 dividends
– Glencore PLC is cutting copper production by 455K tonnes within 2 years
Anglo American Reversal November 4, 2015
- Anglo American (AAL: FTSE 100) is trading 6.21% higher at 596.80p. On the 29 October, Anglo American was trading at a 52-week low of 530.10
Why the Sudden Reversal in Mining Stocks on the FTSE 100?
China has as much to do with the upswing as it did with the downswing. Recent upbeat comments – backed up by concrete plans – by the president in China have helped markets to rally. The spike in the FTSE 100 has been matched by positive gains in major European bourses too. Oil stocks and mining stocks have reacted positively to news from China. This is particularly good news for the FTSE 100 index which is heavily weighted by the mining and energy sectors. While the gains so far on the FTSE 100 are marginal – they are positive and that’s precisely what binary options traders need when deciding whether to place call or put options on the index. The FTSE 100 was trading at 6,428.43 at 3PM GMT – up 0.70% for the day, or 44.82 points. And the reason why everyone is bullish vis-à-vis China is the uptick in Services PMI. That is definitely an important economic tidbit for the global economy.
Important Tips for Trading the FTSE 100 Index Today
Another tip that you can use when deciding whether the FTSE 100 index is a call or a put option is the ratio of Members Up/Members Down. At the time of writing, there were 68 members up and 33 members down. Any ratio greater than 1 indicates that the majority of companies are performing better on the day, but a caveat is in order: it does not take weighting into account. So you should always be mindful of what the big companies like Anglo American and Glencore PLC are doing. In this case – both are surging so that’s your cue for a call option on the FTSE 100. Plus, other mining stocks in BHP Billiton are also on the up and up – use this information to your advantage in your trading activity. With other commodities, we’re also seeing gains in oil, with Tuesday’s 3% gain helping to boost Brent and WTI Crude oil.
On Thursday 5 November, the Bank of England will make its announcement regarding interest rates. The strong growth in services PMI is going to push hawks towards a rate hike, but the decision by the Fed will be a strong factor too. The strong gain from 53.3 to 54.9 between September and October is significant. This is now the third successive year that companies across the UK are hiring more workers and expanding production. However, my opinion is that rates will not rise and the BoE will want to see a sustained period of growth and a calming in Asian and EM economies before hiking rates. Overall, the FTSE 100 is a bullish prospect!
Disclosure: None.